How to Improve MACD Signals for Higher Profits
MACD is the most popular Retail Trader stock indicator; however, it often lags price due to the fact that it is based on moving averages. There is a way to improve the use of MACD for earlier signals and entries to increase profits and lower risk.
As a Price and Time Momentum Indicator, MACD is missing one of the Primary DATA streams that is recorded for every stock transaction. This missing data is what causes MACD to lag and give false positive or false negative signals during sideways trending price action. When the missing data is included in the analysis, MACD Users are able to see the more subtle patterns of MACD and are able to enter the stock before the run begins.
This is a huge bonus for Swing Traders, Momentum Traders, Day Traders, and other short-term Trading Styles. The missing data is a key element of Professional Trading analysis and is why Professional Traders earn so much more profit per trade than Retail Traders.
By incorporating this one additional piece of data, StockCharts.com Users will find more opportunities to trade. They will be trading with the Professional Traders more often, rather than trading against this large lot Market Participant Group.
Did you know that most momentum runs are initiated by Professional Traders getting into a stock early? This is because they have access to information sooner than it is available to the Retail Trader.
Also, the Professional Trader is an expert at routing their orders to execute on a precise penny execution at the selected venue.
This makes their price patterns consistent, reliable, and rewarding for Retail Traders. However just using MACD is insufficient to find the Professional Traders buying activity, because when they are buying quietly they do not move price enough to create a MACD signal.
Martha Stokes CMT
TechniTrader technical analysis using StockCharts charts, courtesy of StockCharts.com
Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses
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